MAKING CENTS: Age disparity in marriage means a different financial plan

By John Napolitano, CFP CPA

Tuesday

Sep 11, 2018 at 9:30 AM

Different factors when the partners are a decade apart.

It is common to see marriages between a couple where the age disparity is more than a few years. For purposes of this conversation, let’s set the discussion for spouses with an age disparity of 10 years or more. It doesn’t matter which spouse is older. In my experience it’s more common to find a 10+ year disparity where the husband is the older one.

The first planning consideration is how to best manage the age gap when it comes to retirement. If at 65, the older spouse wants to retire, what does this mean to the younger spouse? This is learned by forecasting. By gathering precise data on assets, earnings, income and spending you determine whether the younger spouse can afford to retire simultaneously as the older spouse. Be wary when forecasting spending, if you underestimate amounts and the younger spouse retires, it may cause an irreparable decline in savings and investments. This may worsen if your investments declined right after retirement.

Another consideration is Social Security. The first to retire is eligible to collect Social Security just after retirement, but the younger spouse may not be eligible for another 10 years. The answer here depends on the earnings records per spouse. If the first to retire has the larger benefit, then it may make most sense to wait until age 70 to collect if your spouse’s benefit is much smaller than yours. Spouses are eligible to collect the higher of their own calculated benefit or 50 percent of their spouse’s. If 50 percent of your elder spouse’s benefit is greater than what you’d collect on your own, then the elder spouse should wait as long as possible so the younger spouse could collect that higher amount when suitable. This also means the surviving younger spouse will collect 100 percent of the deceased spouse’s benefit forever.

If the younger spouse is a woman, then longevity planning should be considered. Women have a longer life expectancy than men. Factor that with the age disparity and it’s possible that a younger female could live for 20 or more years after the elder spouse’s passing. Beyond ensuring that the assets will last long enough for the younger spouse, special considerations may also be needed in your estate plans – especially if this is a second marriage with children from a prior marriage.

Everyone handles this situation differently, but the ones that go smoothly are the ones that are clearly communicated at the outset. It usually doesn’t sit well with adult children when they find out that their dad’s new spouse gets everything.

Address the plan early, and communicate your intentions with everyone involved. Unless the elder spouse hates their children, some sort of trust with an independent trustee may be in order to see that your younger spouse doesn’t remarry or otherwise squander all of the assets so that your children later see nothing.